The mortgage business appears to most individuals to speak a foreign language, with ambiguous jargon and abbreviations. Of course, when dealing with huge sums of money, such as those found in a home mortgage, you want to make sure you grasp the language as much as possible to prevent making mistakes. So, here’s a quick rundown of some of the most common terminology used when applying for a mortgage or house loan.
Fixed rate, adjustable rate, convertible, and special loans are the four types of mortgages that are commonly accessible. Great post to read
Fixed Rate Loans – These are usually found in the 30 year or 15 year loan categories, and they simply mean that you pay a fixed monthly payment over the course of 30 or 15 years.
Adjustable Rate Loans – This type of loan allows your payment to fluctuate depending on the current interest rate. When interest rates rise, your payment rises, and when interest rates fall, your payment decreases.
Convertible Loans – These are loans that can begin as either a fixed rate or an adjustable rate mortgage and subsequently be converted to the other type of loan. Many consumers will start with an adjustable rate mortgage and then switch to a fixed rate mortgage when interest rates are at their lowest.
FHA loans for first-time homebuyers and people with bad credit, as well as VA mortgage loans for veterans and their families, are examples of special loans.
There are a few more phrases you should be aware of while applying for a house loan, including:
Appraisal – You pay an independent person to accurately appraise the value of your home based on accepted market calculations.
Closing costs are fees that are often paid after the mortgage documents are signed, and they cover the cost of transferring ownership of the home.
Points are a monetary value that corresponds to 1% of the total cost of the home being financed.
In a transaction involving two or more parties, money is often held in escrow by a neutral third party.
Pre-qualify – When a lending institution says you qualify for a home mortgage in a certain price range, you’ve passed the first step.
Pre-approval – When a lending institution has already completed the appropriate documentation and approved a home mortgage loan for a specific amount, it is known as pre-approval.